26 May 2016

Peak District National Park Authority, Aldern House, Baslow Road, Bakewell, DE45 1AE

FAO John Keeley Planning Manager - North

Dear John

Planning Application Ref NP/DDD/0815/0779 Newburgh Works, Bradwell, S33 9NT

I refer to the above matter and to your instruction to undertake a detailed analysis of the applicant’s financial development appraisal submitted in support of the planning application.

Background The planning application seeks to redevelop the site of the current and operational Newburgh Works as follows:

- Demolition of existing industrial buildings, development of 55 dwellings (C3) including 12 Affordable House Types.
- Erection of 929 m² industrial unit with single storey extension to link new industrial unit to Newburgh Hall
- Refurbishment of Newburgh Hall,
- Car parking, landscaping and drainage attenuation with access from Netherside and Bradwell Head Road

The Development Appraisal has three prongs. First, it seeks to demonstrate the financial justification for the applicant’s case to construct open market houses (contrary to Plan Policy in the Peak District National Park) on the grounds that by doing so, the development will be able to provide 12 Affordable Homes for transfer, without price or premium, to Bradwell Community Land Trust to both administer and manage.

Second, it seeks to justify a departure from the Bradwell Parish Neighbourhood Plan 2015-2030 wherein Policy H2 of that Plan

“supports the development of the Newburgh site for the provision of open market homes as part of a mixed use development to enhance the character of Bradwell, subject to the number of open market dwellings not exceeding 40; and the provision of local needs affordable housing at a level in accordance with a financial viability assessment and an up to date housing survey needs…….” Third is the applicant's justification for the Land Value incorporated into the FDA. It is the intention of the land owner – Newburgh Engineering Ltd – to reinvest the capital receipt from the sale of the land into the retained portion of the site, construction circa 10,000 sq ft of new build industrial space and refurbishing the existing Newburgh Hall for employment use. Camstead Limited have provided a cost estimate and the target “Land Cost” in the Housing FDA is intended to ensure that the full cost to Newburgh Engineering of relocating the remaining elements of the works into (part of) the new space and Newburgh Hall is fully funded by the housing scheme.

For the avoidance of doubt, the FDA to which I refer throughout this report is the amended version provided by Camstead Homes by email on the 8th April 2016 and the Industrial Relocation Costs on the 11th April. Both are attached.

Camstead Limited – Financial Development Appraisal - 43 Open Market Residential Homes and 12 Affordable Homes

Camstead Limited, a residential developer based in Cambridge and established circa 10 years ago is a wholly owned subsidiary of Yelcon Homes (est. 1952) - an experienced developer of housing sites throughout the North and Midlands.

The FDA does not provide a cost plan undertaken by quantity surveyors but is clearly based on development experience and I am satisfied that it is a fair representation of the costs and sale yields Camstead are anticipating for the scheme.

Revenue

I am satisfied that the projected Sale Price structure of each element of the proposal is reasonably deduced and in line with current yields and expectations. The applicant has submitted as supporting information, analysis of market values by reference to sales of residential properties both in Bradwell and in the immediate Peak Park area. This has been provided by ELR of Sheffield with residential sales offices in Bakewell and Hathersage and is included in the Viability Report dated 12 August 2015.

Construction Costs

Base Line

Whilst the FDA does not provide a detailed costs analysis separating base line unit construction cost from infrastructure and other costs, the overall rate of £120 psf (£1292 psm) would seem realistic reflecting the increased cost of speculative construction in the Peak District given the higher design criteria (natural stone and slate roofing), remoteness and increased potential of disruption due to severe weather.

The RICS BCIS Quarterly Review of Building Prices provides some assistance when seeking guidance for construction costs. Housing – mixed developments – shows a current range of £506 to £1045 psm rising to £787 to £1126 psm for a development of standard detached two storey housing.

I provide valuations for various funders for loan facilities to residential developers and am therefore privy to detailed cost plans. The Camstead overall construction rate before abnormals and other costs are added of (£120 psft) £1292 psm (which figure includes all infrastructure and site development costs) is, in my view, fairly stated and not excessive.

**Abnormals**

The provisions are both accepted and fairly based

The addition of the Abnormal element to the Base Line construction costs increases the overall construction costs to £130.50 psft (£1404.7 psm). This compares favourably when compared with other appraisals submitted to PDNPA – Deepdale, Bakewell & the former creamery site in Hartington.

**Other Costs**

The cost items included under this heading are normal and within the expected cost range, save for the fee of £113,279 for the Planning Consultants which appears excessive if limited solely to the subject application.

**Finance**

Funding costs have been calculated at an assumed rate of 5.0%. This is reasonable.

**Marketing Costs**

Fairly stated at just 2.25% of gross sales yield.

**Profit**

The FDA includes a provision for Gross Profit based on 17.5% of Gross Development Value (GDV). This falls just outside the range that would normally be expected being typically 20% to 24% of GDV. If the GP percentage is increased to 20%, residual land value falls from £1.615m to £1.29m. This may be significant (see section on Land Value).

**Land Value**

The capital receipt required by the site owner for the residential development site is stated to be (as a minimum) sufficient to cover the full cost of providing the new and refurbished employment space including all relocation costs, fit out and adaption costs likely to be incurred by Newburgh Engineering Ltd. Clearly, the final figure will not be representative of the Market Value of the site in its present condition. A schedule of estimated costs is attached as provided by Camstead. This totals £1,587,775.

This raises two issues to be addressed. The first relates to a fair and reasonable value to be attributed to the residential site and the second is the detail of the schedule of estimated costs to form and create the new employment space. The applicant has not provided a site valuation nor any supporting evidence. I estimate via Promap the gross site area of the application site to be some 6 acres and the net developable area to be 4.5 acres. The circa 1.5 acres of “non developable” land falls outside the existing developed industrial site and therefore I would attribute very little value to that land beyond perhaps agricultural.

The core site of 4.5 acres clearly has value for existing and permitted use. Taking the approach by the applicant, this would equate to the equivalent of £355,555 per acre. There are few comparables of open market sales of similar sites in the Peak Park. However, I turn to the former Creamery Factory at Hartington and the valuation provided by the District Valuer of a redundant industrial complex. The buildings on the Hartington site were, at the time of valuation, arguably in a significantly poorer state of repair and condition that those existing on the Newburgh site. Hartington was valued on an existing use basis reflecting the planning policies of the PDNPA at £328,000 for the core employment site of some 4.38 acres. The date of the valuation was April 2011 and the UK was still suffering from the effects of the deep post 2007 recession.

Although valued some 5 years ago, there is relevance in that valuation and it would suggest that, even adjusting for the higher quality buildings and the improvement to the UK economy over the past 5 years, the expectation of generating circa £1.6m for the subject site for continuing employment use, bearing in mind the site to be valued does not include the current primary access and retained industrial land, would seem optimistic.

RICS guidance “Financial Viability in Planning” reinforces the concept of “willing seller and willing buyer”. In this instance, whilst it may be argued the Market Value of the subject site falls below that required by the land owner, we must nevertheless accept that if PDNPA are seeking to gain an Affordable Housing provision and bring a difficult and redundant industrial site into successful re-use with the added benefit of some further employment space being created to modern standards, then the requirement of the land owner – i.e. “willing seller” cannot be ignored. This differs significantly from the Hartington case in that, the land owner at Hartington acquired the site for an inflated amount on the assumption open market housing would be permitted. At Bradwell, the land owner is in an entirely different position.

Turning now to the cost estimate for the replacement new and refurbished employment space, the overall construction costs appear reasonable. I do not have sufficient detail relative to the additional costs Newburgh Engineering will incur to adapt the new building and relocate but I am inclined to accept the submitted costs at face value. The applicant has submitted two FDA’s – one assumes a maximum of 39 open market houses together with 12 affordable homes and produces a residual land value of £1,312,319 whilst the second, for a total of 43 open market houses and maintaining the 12 Affordable homes produces a residual land value of £1,614,656. It is argued that only by producing the higher number of open market houses can the land owner economically afford to construct the new employment space and maintain the presence of Newburgh Engineering in Bradwell.

**Sequential Testing**

The applicant has not produced a sequential test demonstrating the financial implication of providing a lesser number of affordable homes and the impact on both profitability and residual land value.

I have transferred the applicant's data to my own Appraisal programme. Maintaining all costs at their current level including the required gross profit margin, the impact on the residual land value of providing just SIX affordable homes together with 6 serviced plots for the construction of further affordable homes in the future is an increase to £2,122,300 (up from £1.6m).

If I run the programme to assume 40 open market homes, maintain the residual land value at £1.6m, then the appraisal produces TEN affordable homes plus two serviced plots.

Finally, to produce SIX affordable homes and six serviced plots and maintain residual land value at £1.6m requires 34 open market houses.

**Concluding Remarks**

1. The (revised) submitted FDA for a development of 55 houses is a reasonable and realistic appraisal of likely cost and yield of the proposal.

2. It is for PDNPA to decide if, in order to achieve the construction and transfer of ownership to an acceptable authorised body of 12 Affordable Houses prioritises over policy H2 of the Bradwell Parish Neighbourhood Plan.

3. I am satisfied that if Policy H2 is to be the over-arching policy in this matter, that 10 affordable houses plus two fully serviced plots for construction of future affordable homes is capable of being achieved if the open market housing on the Newburgh site is limited to a maximum of 40. It should however be noted that a lesser number of open market houses could be developed if the number of completed affordable houses was to be reduced but with a corresponding increase in the number of fully serviced plots. 4 I have concerns relating to the viability of the design criteria of the new build industrial element of the application. The car parking arrangement and provision for the manoeuvring of HGV vehicles appears wholly inadequate and sub standard.

Date of Issue of Report 26 May 2016

Yours sincerely

[Signature]

Peter H Milner FRICS Director APPENDIX A

Camstead Homes Financial Development Appraisal (amended) Planning Application Ref: NP/DDD/0815/0779\
Newburgh Engineering Works, Bradwell, S33 9NT

| Sales | Area Sq Ft | Value | Total | |----------------|------------|--------|---------| | Type 1 | 12 | 882 | £0.00 | £0 | | Type 2 | 4 | 879 | £250.00 | £219,750| £879,000| | Type 3 | 4 | 879 | £250.00 | £219,750| £879,000| | Type 4 | 2 | 931 | £250.00 | £232,750| £465,500| | Type 5 | 4 | 1,159 | £250.00 | £289,750| £1,159,000| | Type 6 | 4 | 1,349 | £250.00 | £337,250| £1,349,000| | Type 7 | 1 | 1,227 | £250.00 | £306,750| £306,750 | | Type 8 | 11 | 1,593 | £250.00 | £398,250| £4,380,750| | Type 9 | 2 | 2,039 | £250.00 | £509,750| £1,019,500| | Type 10 | 1 | 1,731 | £250.00 | £432,750| £432,750 | | Type 11 | 2 | 1,385 | £250.00 | £340,250| £680,500 | | Type 12 | 2 | 1,361 | £250.00 | £340,250| £680,500 | | Type 14 | 2 | 2,280 | £250.00 | £570,000| £1,140,000| | **Total Revenue** | **51** | **64,121** | **£13,384,250** |

**Less Costs**

**Construction Costs**

| Description | Amount | Percentage | Total | |------------------------------|--------------|------------|-----------| | Construction Costs | 64,121 | | £120 | | Site Abnormals | | | £7,694,520| | Dry Stone Walls | | | £102,920 | | Water Attenuation | | | £25,000 | | Site Levels | | | £67,500 | | Underbuild | | | £93,600 | | Public Open Space | | | £50,000 | | Demolition | | | £119,000 | | Top Soil | | | £16,500 | | Construction Contingency | 3% | | £230,836 | | **Total Construction Costs** | | | £8,399,876|

**Other Costs**

| Description | Amount | Percentage | Total | |------------------------------|--------------|------------|-----------| | Travel Plan | | | £12,500 | | NHBC | | | £51,000 | | Fees for Construction | | 7.50% | £577,089 | | Fees for Abnormals | | 5.00% | £9,721 | | Planning Application Fee | | | £24,629 | | Fees for Planning Associated Consultants | | | £113,279 | | **Total Other Costs** | | | £788,218 |

**Interest**

| Description | Amount | Percentage | Total | |------------------------------|--------------|------------|-----------| | 5.00% say | | | £180,000 |

**Fees**

| Description | Amount | Percentage | Total | |------------------------------|--------------|------------|-----------| | Marketing and Sales | | 2.00% | £267,685 | | Solicitor | | 0.25% | £21,000 | | **Total Fees** | | | £288,685 |

**Profit assessed by GDV**

| Description | Amount | Percentage | Total | |------------------------------|--------------|------------|-----------| | 17.5% | | | £2,342,244|

**Total Costs and Profit**

| Description | Amount | Total | |------------------------------|--------------|-----------| | **Gross Land Value** | | £1,385,228| | Less Fees | | | | Solicitor | | £5,000 | | Agents Fees | | £12,500 | | Stamp Duty | 4% | £55,409 | | **Net Land Value** | | £1,312,319| | Newburgh Engineering Bradwell | Date | 17.02.2016 | |-------------------------------|------|------------| | Originator | skh | | **43 For Sale Units** | | | | | Area Sq Ft | Value | Total | | **Sales** | | | | | Type 1 | 12 | 882 | £0.00 | £0 | | Type 2 | 4 | 879 | £250.00 | £219,750 | £879,000 | | Type 3 | 4 | 879 | £250.00 | £219,750 | £879,000 | | Type 4 | 2 | 931 | £250.00 | £232,750 | £465,500 | | Type 5 | 4 | 1,159 | £250.00 | £289,750 | £1,159,000 | | Type 6 | 4 | 1,349 | £250.00 | £337,250 | £1,349,000 | | Type 7 | 1 | 1,227 | £250.00 | £306,750 | £306,750 | | Type 8 | 11 | 1,583 | £250.00 | £398,250 | £4,380,750 | | Type 9 | 2 | 2,039 | £250.00 | £509,750 | £1,019,500 | | Type 10 | 1 | 1,731 | £250.00 | £432,750 | £432,750 | | Type 11 | 2 | 1,385 | £250.00 | £346,250 | £692,500 | | Type 12 | 6 | 1,361 | £250.00 | £340,250 | £2,041,500 | | Type 14 | 2 | 2,280 | £250.00 | £570,000 | £1,140,000 | | **Total Revenue** | 55 | 69,565 | | £14,745,250 | | **Less Costs** | | | | | **Construction Costs** | | | | | Construction Costs | 69,565 | | £120 | £8,347,800 | | Site Abnormals | | | | | | Dry Stone Walls | | | | £102,920 | | Water Attenuation | | | | £25,000 | | Site Levels | | | | £67,500 | | Underbuild | | | | £99,000 | | Public Open Space | | | | £50,000 | | Demolition | | | | £119,000 | | Top Soil | | | | £16,500 | | Construction Contingency | 3% | | | £350,434 | | **Total Construction Costs** | | | | £9,078,154 | | **Other Costs** | | | | | Travel Plan | | | | £12,500 | | NHBC | | | | £55,000 | | Fees for Construction | 7.50% | | | £626,085 | | Fees for Abnormals | 5.00% | | | £18,046 | | Planning Application Fee | | | | £24,629 | | Fees for Planning Associated Consultants | | | | £113,279 | | **Total Other Costs** | | | | £849,539 | | **Interest** | 5.00% | | | £200,000 | | **Fees** | | | | | Marketing and Sales | 2.00% | | | £294,905 | | Solicitor | 0.25% | | | £36,863 | | **Total Fees** | | | | £331,768 | | **Profit assessed by GDV** | 17.5% | | | £2,580,419 | | **Total Costs and Profit** | | | | £13,039,880 | | **Gross Land Value** | | | | £1,705,370 | | **Less Fees** | | | | | Solicitor | | | | £5,000 | | Agents Fees | | | | £17,500 | | Stamp Duty | 4% | | | £66,215 | | **Net Land Value** | | | | £1,614,656 |

## Residential Construction Costs

| Proposed Housing | Area R2 | Value | Total | Comments | |------------------|---------|-------|-------|----------| | 1 Proposed Housing Development - Build Cost | 68215 | £ 120.00 | £ 8,185,800.00 | Housing costs includes the following: - Foundations, house drainage, natural stone, blockwork, roof structure, natural slate roof covering, all internal works, external drainage, garden, fencing, roads and footpaths and road drainage to houses | | 2 Site Abnormals | | | | | | Dry Stone walls | | £ 51,480.00 | 143m Stone wall 1.8m high | | | | £ 9,680.00 | 44m Dry Stone wall 1.1m high | | | | £ 41,760.00 | 138m Dry stone wall 0.6m high | | 3 Water attenuation and site levels | | £ 191,500.00 | Balancing pond attenuation £25,000, and cut and fill exercise to raise levels to make the drainage design work, 9,000m³ at £67,500, using existing crushed materials for fill exercise, in an attempt to minimise imported fill materials and allowance for underbuild of houses, £1,800 per plot. | | 4 Public Open Space, Landscaping, Footpaths | | £ 50,000.00 | Creating Public open Space including landscaping, planting, fencing, footpaths, lighting, seating, bins, etc | | 5 Demolition | | £ 119,000.00 | Demolition of all existing buildings including removal of all asbestos, crushing of all building materials for retaining on site for re-use, removal of all structure, pits, drainage, slabs, etc | | 6 Top Soil | | £ 16,500.00 | Top soil cover 600mm in rear gardens. Allowance £300 per plot | | **Total Costs** | | **£ 8,665,720.00** | |

### Cashflow

| Year 2017 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |-----------|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----| | **Costs** | | | | | | | | | | | | | | Monthly | 137,936 | 875 | 877 | 879 | 1,666,794 | 66,961 | 47,260 | 100,840 | 284,080 | 285,166 | 287,237 | 285,825 | | Cumulative Total | 137,936 | 138,412 | 139,089 | 139,638 | 1,795,737 | 1,862,383 | 1,926,819 | 2,030,153 | 2,164,223 | 2,379,798 | 3,096,826 | 3,458,381 | | **Sales** | | | | | | | | | | | | | | Monthly | | | | | | | | | | | | | | Cumulative | | | | | | | | | | | | | | **Cashflow** | 137,936 | 138,412 | 139,089 | 139,638 | 1,795,737 | 1,862,383 | 1,926,819 | 2,030,153 | 2,164,223 | 2,379,798 | 3,096,826 | 3,458,381 | | **Interest** | | | | | | | | | | | | | | Monthly Interest | 575 | 577 | 579 | 582 | 7,481 | 7,760 | 8,040 | 8,459 | 9,024 | 11,411 | 12,903 | 14,267 | | Total Interest | 27,2 | 3,128 | 3,734 | 4,213 | 5,794 | 7,203 | 7,703 | 8,203 | 8,703 | 9,203 | 9,703 | 10,203 |

### Year 2018

| Year 2018 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |-----------|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----| | **Costs** | | | | | | | | | | | | | | Monthly | 360,019 | 361,019 | 360,368 | 359,245 | 359,102 | 350,501 | 354,648 | 355,461 | 355,313 | 351,141 | 349,903 | | Cumulative Total | 3,815,365 | 4,175,366 | 4,537,273 | 4,886,218 | 5,234,021 | 5,581,570 | 5,937,370 | 6,222,030 | 6,572,500 | 7,027,813 | 7,578,854 | 8,128,917 | | **Sales** | | | | | | | | | | | | | | Monthly | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | 632,654 | | Cumulative | 532,654 | 1,267,306 | 1,901,952 | 2,534,736 | 3,168,420 | 3,802,104 | 4,435,786 | 5,069,472 | 5,703,156 | 6,336,840 | 6,970,524 | | **Cashflow** | 3,815,365 | 3,543,204 | 3,269,906 | 2,945,457 | 2,715,956 | 2,441,455 | 2,165,272 | 1,886,252 | 1,606,028 | 1,324,857 | 1,042,114 | 768,393 | | **Interest** | | | | | | | | | | | | | | Monthly Interest | 15,897 | 14,763 | 13,625 | 12,481 | 11,331 | 10,189 | 9,022 | 7,859 | 6,692 | 5,519 | 4,347 | 3,163 | | Total Interest | 98,601 | 112,364 | 124,889 | 139,410 | 150,822 | 160,882 | 170,004 | 177,184 | 184,355 | 191,075 | 194,417 | 197,577 |

### Year 2019

| Year 2019 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |-----------|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----|-----| | **Costs** | | | | | | | | | | | | | | Monthly | 348,761 | 347,564 | 346,407 | 346,621 | 346,621 | 346,621 | 346,621 | 346,621 | 346,621 | 346,621 | 346,621 | 346,621 | | Cumulative Total | 8,077,568 | 8,425,263 | 8,771,770 | 9,117,321 | 9,462,943 | 9,808,564 | 10,154,185 | 10,499,807 | 10,845,428 | 11,191,048 | 11,536,670 | 11,536,670 | | **Sales** | | | | | | | | | | | | | | Monthly | 633,684 | 632,684 | 632,684 | 632,684 | 632,684 | 632,684 | 632,684 | 632,684 | 632,684 | 632,684 | 632,684 | 632,684 | | Cumulative | 7,604,206 | 8,237,892 | 8,871,576 | 9,505,260 | 10,128,941 | 10,772,626 | 11,406,212 | 12,039,996 | 12,673,680 | 13,307,364 | 13,941,046 | 14,571,722 | | **Cashflow** | 479,451 | 185,888 | 97,802 | 99,779 | 97,841 | 98,804 | 101,266 | 103,028 | 105,092 | 107,156 | 109,220 | 111,284 | | **Interest** | | | | | | | | | | | | | | Monthly Interest | 1,072 | 700 | | | | | | | | | | | | Total Interest | 139,320 | 200,326 | 200,326 | 200,326 | 200,326 | 200,326 | 200,326 | 200,326 | 200,326 | 200,326 | 200,326 | 200,326 | APPENDIX B

Industrial Relocation Costs | Construction Costs | | | | |----------------------------------------|-------|-------|-------| | New Industrial Unit - Shell | 10,000| £75.00| £750,000.00 | | Newburgh Fit out | 6,400 | £25.00| £160,000.00 | | Refurbish Buildings | 2,600 | £110.00| £286,000.00 | | Contingency | 5% | | £51,800.00 | | Total | | | £1,247,800.00 | | Professional Construction Fees | 12.50%| | £155,975.00 | | Total | | | £1,403,775.00 |

| Associated Costs | | | | |----------------------------------------|-------|-------|-------| | Newburgh relocation of existing plant and effect on business | say | | £150,000.00 | | Newburgh Fees For Sale of Land | | | | | Agents fees based on £1.6M | 1.50% | | £24,000 | | Solicitors fees | | | £10,000 | | | | | £34,000 | | Total | | | £184,000.00 |

| Overall Cost of relocation | | | £1,587,775.00 |